Explain how the concept of innovation streams relates to the concept of sustainable competitive advantage. Give an example of how this occurs in the business world

Organizations can create competitive advantage for themselves if they have a distinctive competence that allows them to make, do, or perform something better than their competitors. A competitive advantage becomes sustainable if other companies cannot duplicate the benefits obtained from that distinctive competence. Technological innovation is important for sustainable competitive advantage because it enables other companies not only to duplicate the benefits obtained from a company's distinctive advantage but also to quickly turn a company's competitive advantage into a competitive disadvantage.

While technological innovation can threaten a company's sustainable competitive advantage, the ability to create innovation streams can protect a company's sustainable competitive advantage because a stream of innovative ideas and products enables the company to stay one step ahead of the industry game. Innovation streams begin with technological discontinuities that create significant breakthroughs in performance or function. Technological discontinuities are followed by discontinuous change, in which customers purchase new technologies (technological substitution) and companies compete to establish the new dominant design (design competition). Dominant designs emerge because of critical mass, because they solve a practical problem, or because of the negotiations of independent standards bodies. Because technological innovation is both competence-enhancing and competence-destroying, companies that bet on the wrong design often struggle, while companies that bet on the eventual dominant design usually prosper. Emergence of a dominant design leads to a focus on incremental change, lowering costs, and small, but steady improvements in the dominant design. This focus continues until the next technological discontinuity occurs. Companies that keep an innovation stream going are often on the leading edge of this process and, therefore, able to sustain a competitive advantage.

Students may provide a variety of examples to illustrate the concepts of innovation streams resulting in sustainable competitive advantage. The text provides an example of Intel and the innovation stream associated with its microchips. Student examples should be evaluated based on the degree to which the examples actually illustrate the concepts and components of innovation streams and the degree to which students integrate the concepts into their explanations. In general, examples that come from outside the text demonstrate a higher level of learning than those simply repeating points made in the book.